TaxTMI 
TaxTMI 
2019 (7) TMI 77
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....o be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the action of ld. AO denying deduction u/s.80IB(10) of the Act in respect of profit from sale of car parking space in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee company has undertaken various real estate/ housing development projects. During the year, the assessee company has shown profit derived from housing project at 375, Prince Anwar Shah Road, Kolkata - 700068 which include profit from sale of residential units and sale and rent from the commercial properties. The assessee claimed deduction u/s.80IB(10) in respect of profits derived from sale of residential units and others in the sum of Rs. 197,59,59,835 for the A.Y.2009-10 which is also supported by audit report in form 10CCB furnished along with return of income. There is no dispute as to the eligibility of deduction u/s.80IB(10) of the Act for the assessee in respect of the aforesaid housing project. (i) During the course of the assessment proceedings the appellant had submitted that car parking is part of the housing project: and cannot be separated from the housing project....
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....he decision of the Hon'ble Apex Court relied upon by the ld. AO wherein it was held that sale of stilt parking area by the builders and promoters are illegal in the State of Maharashtra and therefore, if such sale is not permitted by law, then on what grounds it could be claimed that profits from such sales are deductible. The assessee with regard to this decision relied upon by the ld. AO stated before the ld. CIT(A) that the said decision is not relevant to the instant case for the following reasons:- "i. The decision is in respect of sale of stilt car parking in Maharashtra and is therefore in relevance to the rules and regulations' 'prevailing in Maharashtra which is substantially different from that of West Bengal, Kolkata ii. Further the Apex Court has held sale of car parking area illegal on the ground that it is a common area for the flat owners and therefore is a part and parcel of the housing project and should not be sold separately as per rules of State of Maharashtra.' iii. Thus even the Judgment referred by the learned AO contemplates car parking area as an integral part of the housing project, which is the very basis of claim of....
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.... pool, Intercom system Not only this in a housing project drinking water supply, electric Installation, common area services and facilities are also required to be provided by the developer. It has been held that the assessee is entitled for deduction u/s 80IB in respect of amount received from car parking space by the ITAT, Mumbai in DCIT , Central Circle-2;Vs Purvankara Projects Ltd. in ITA Nos. 4347to4351 for Assessment Year 2004-05 to 2008-09. It has. been held by the Hon'ble Bombay High Court in ITA Nos.: 4975/4976 and ^77 of 2010 in the case of Purvankara Projects Ltd. as under:- "The finding of facts recorded by the CIT(A) and approved by ITAT is that, In present case , it is not in dispute that the assessee is entitled to deduction u/s.80IB. The only dispute is whether the assessee is entitled to deduction in respect of amount received towards car parking space. The finding of fact recorded by the CIT(A) and approved by ITAT is that the car parking space forms part and parcel of the housing project, without which even approval for housing project could not have been obtained from competent authority. Therefore, the decision of the Tribunal in ....
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....olkata as mentioned in preceding paras. Further the stand taken by the AO that car parking sold; by the assessee is illegal in view of recent Supreme Court judgment, hence not eligible for deduction u/s 80IB is not tenable for the reason that, issues dealt with in recent Supreme Court judgment in the case of Nahalchand Laloochand Private Limited 'Vs Panchali Copprative Housing Society Ltd. in civil appeal No. 2544 of 2010, are not similar to 'the case of the appellant. In that case promoters wanted to sell stilt parking area as garage to others, whereas in instant case car parking area are allotted to flat owners only to park their cars.: Also in the order dated 7.11.2012 which was Tendered much later than the order passed by Hon'ble Supreme Court, the ITAT, Mumbai in Purvankara Projects Ltd. VS DCIT , Central Circle-2 ITA Nos. 4347 to 4351 for Assessment Year 2004-05 to 2008-09 has held that the assessee is entitled for deduction u/s 80IB in respect of amount received from car parking Respectfully following the" judgment of Hon'ble Bombay High Court the case of Purvankara Projects Limited and of ITAT in case of Vaman Estate it is held that the AO ....
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....sult, appeal of the revenue in ITA No. 1677/Kol/2014 for A.Y.2010-11 is dismissed. 15. Let us take up the assessee appeal for A.Y.2009-10 in ITA No.1543/Kol/2014. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in not allowing deduction of Rs. 4,05,48,257/- being profit from sale of residential units with utility rooms allegedly having correct built up area exceeding 1500 sq.ft. while computing the deduction u/s.80IB (10) of the Act. 16. The brief facts of this issue are that the assessee sold residential flats and utility rooms in the housing project and receipts from profit from sale of flats and utility rooms were claimed to be eligible for deduction u/s.80IB(10) of the Act. The ld. AO asked the assessee to furnish the details of sales with bifurcation of unit wise area of flats and utility rooms sold. In response, the details were furnished by the assessee company. From the perusal of the details, the ld. AO observed that in respect of 73 parties, the assessee had sold flats along with utility rooms wherein the total area had exceeded the limit of 1500 sq. ft which had resulted in violation of provisions of Section 80IB(10)(c) ....
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.... rooms were sold independent of residential flats. They have been sold with residential flats only, 'thus despite of having been located separately, both utility room and flats are a combined unit and, therefore, the limit of area contemplated in Section 80 IB(10)(c) will apply to the total combined area of utility room and the flat. Further the argument of the appellant that Separate conveyance deed were executed in regard to flat3;:and utility rooms can 'at best be described as an attempt to avoid tax' liability by deliberately keeping the flat area within stipulated limit of 1500 sq ft. Since the total area has exceeded the limit of 1500 square feet,; the deduction under section 80IB(10)cannot be allowed in respect thereof I therefore, confirm the disallowance of the claim of Rs. 4,05,48,257/- under section 80IB(10). The ground no. 3 is, therefore, dismissed. 18. Aggrieved the assessee is in appeal before us. 19. We have heard rival submissions. We find that the ld. DR vehemently argued the intention behind introduction of grant of deduction u/s.80IB(10) of the Act that by stating that the same is meant for middle class under affordable housing category and tha....
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....using project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual. (ii) the Hindu undivided family in which such individual is the karta (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta." 19.3. Ld. AR placed on record the copy of allotment letter of utility rooms (sample copies) in pages 74 to 76 of the supplementary paper book. We find that the ld. DR placed reliance on the decision of Hon'ble Karnataka High Court in the case of CIT & Anr. Vs. Raghavendra Constructions reported in 354 ITR 194 (Kar). The operative portion thereon is reproduced hereunder: "8. Therefore, the intention is clear. In calculating the built-up area it is only the inner measurements of the residential unit on the floor level, which have to be taken into consideration. If there are any projections and balconies and if it exclusively belongs to the residential units, then, that also has....
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....ner to whom said servant quarter is attached. It is of absolutely no relevance whether servant quarter documentation has been made by way of a separate conveyance deed or by way of separate letter to the concerned flat owner. Substance of the transaction needs to be seen than its form. We find that the decision placed on record by the ld. DR of Hon'ble Karnataka High Court supra clearly supports our understanding of the expression "built up area" clearly defined in Section 80IB(10)(14) of the Act to include the inner measurements of all the residential units on the floor level. It is not in dispute that by taking into account inner measurements of the 73 residential units plus their respective servant quarters, the total expenditure exceeded 1500 sq. ft thereby leading to violation of 80IB (10(c) of the Act. Hence, we hold that the ld. AO had rightly denied deduction u/s.80IB(10) of the Act to the extent of utility rooms (servant quarters) in the sum of Rs. 4,05,48,257/-. Accordingly, ground No.1 raised by the assessee is dismissed. 20. Ground No.2 raised by the assessee for A.Y.2009-10 is general in nature and does not require any specific adjudication. 21. In the result, th....
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....rofit percentage of 45.70% on the said sale value of Rs. 3,13,02,000/- and disallowed deduction u/s.80IB(10) of the Act in the sum of Rs. 1,43,05,014/- (45.70% of Rs. 3,13,02,000/-.) 26. Before the ld. CIT(A), the assessee stated that it is very clear in the valuation report issued by the Divisional Valuation officer that the site in question was inspected on 18/02/2013 but entry was denied into any of the flats for making the measurement. Accordingly, the Valuation Officer had managed to measure the terrace floor of the relevant flat types from which it is not possible to calculate the exact built up area of any typical flat. It was also pointed out that the Valuation Officer while calculating the built up area from terrace had also included the area of terrace garden which is incorrect. To summarize, the assessee pleaded before the ld. CIT(A) that the valuation report to the Divisional Valuation Officer cannot be relied upon for the following reasons:- (i) Physical verification was not carried out properly on the relevant flats in respect of its disallowance has been made. (ii) The Valuation Officer has himself stated that exact built up area could not be cal....
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....The inner measurement of a residential unit should only be taken for calculation of built up area. The built up area of each unit is within 1500 sq.ft. He further argued that as per the National Building Code of India, the definition of Plinth Area and Covered Area are given separately which also supports the above fact. For the sake of convenience, the relevant portion of National Building Code of India is reproduced herein below:- " 2.65 Plinth Area-The built up covered area measured at the floor level of the basement or any storey. 2.26 Covered Area- Ground area covered by building immediately above the plinth level. The area covered by the following in the open spaces is excluded from covered area. a) Garden, rockery, well and well structures, plant nursery, waterpool, swimming pool (if uncovered), platform round a tree, tank, fountain, bench, CHABUTRA with open top and unenclosed on sides by walls and the like; b) Drainage culvert, conduit, catch-pit, gully pit, chamber, gutter and the like; c) Compound wall, gate, unstoreyed porch and portico, canopy, slide, swing, uncovered staircase, ramps areas covered by CHHAJJA and th....
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.... 4.2.3. We also find lot of force in the alternative arguments of the Learned AR that the term 'terrace' is not defined in the Act. However the word 'terrace' originates from a French term and is known as terrasse, terrazzo in Italian and spelled as terraza in Spanish. This is an outdoor extension that can be occupied by lots of people and is beyond ground level. A terrace has more space and with an open-top. We find that the definition of built up area means inner measurement of the residential unit at the floor level including the projections and balconies as increased by the thickness of the walls but does not include the common areas shared with other residential units. Hence it could be concluded that the open terrace is not covered within the meaning of built up area as it is open to sky and would not be part of the inner measurement of the residential floor at any floor level. Reliance in this regard is made on the decision of the co-ordinate bench of Ahmedabad Tribunal in the case of Amaltas Associates vs ITO reported in 131 ITD 142 (AHD.) wherein it was held that the definition of built up area is inclusive of balcony but not open terrace. It further held that DVO has ....
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....find by reason of exclusion of open terrace area from the built up area, application of proportionality theory does not arise. In the circumstances, we find no justifiable ground to accept the plea of the Revenue on this aspect. 8. As far as the Revenue's contention that for the purpose of Section 80- IB(10} deduction, the assessee should have owned the property is concerned, the same is liable to be rejected by reason of our decision rendered in T.C.Nos. 581, 1186 of 2008 and 136 of 2009 - CEEBROS HOTELS PVT LTD v. DEPUTY COMMISSIONER OF INCOME TAX dated 19.10.2012. Hence, the appeals filed by the Revenue viz., T.C. (A). Nos. 583 and 584 of 2011 stands dismissed and this portion of the Tribunal's order stands confirmed. The assessee's appeals in T.C.Nos.316 and 317 of 2012 stand allowed, holding that the terrace area . No costs. 4.2.5. Reliance is also placed on the decision of the co-ordinate bench decision of Pune Tribunal in the case of Shri Naresh T. Wadhwani vs DCIT in ITA No.s 18, 19 & 20 /PN/2013 for Asst Years 2007-08,2008- 09 & 2009-10 dated 28.10.2014, wherein it was held that :- " 18. A bare perusal of the aforesaid question o....
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....ation the definition of 'built-up area' contained in section 801B(14)(a) of the Act, which was inserted w.e.f. 01.04.2005. As per the Hon'ble High Court even after assuming that such definition was to be retrospectively applied yet the area of open terrace would not fall within the meaning of the expression 'built-up area'. The Hon'ble High Court referred to the Indian Standard Method of Measurement of Plinth, Carpet and Rentable Areas of Buildings as issued of Bureau of Indian Standards and also the meaning of the aforesaid expression assigned as per the rules and regulations of the local authority and concluded that an open terrace could not be equated to a 'projection' or 'balcony' referred to in section 80IB(14)(a) of the Act. 21. Notably, the Hon'ble High Court also considered an argument from the side of the Revenue to the effect that the sale of the area of open terrace by the assessee to the respective purchaser would justify the inclusion of such terrace area into the calculation of 'built-up area'. Before us also, the learned CIT-DR has raised the said issue though she has fairly conceded that such a fi....
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....e (c) of section 80IB(10) of the Act. Thus, the argument of the learned CIT-DR is hereby rejected. 23. In view of the aforesaid judgement of the Hon'ble Madras High Court, we are unable to uphold the stand of the Assessing Officer to include area of terrace as a part of the 'built-up area' in a case where such terrace is a projection attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unit- holders." 4.2.6. In view of the aforesaid judicial precedents, the terrace area needs to be excluded from the built up area and if the same is excluded , then the resultant built up area is well within the 1500 sq.ft limit prescribed in the statute and hence rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order." 32. However, we direct the ld. AO to verify the workings to be given by the assessee in terms of sq.ft to ensure whether the aforesaid four flats after excluding the terrace garden area fall within the limits of 1500 sq.ft. Respectfully following the aforesaid judgement and in view of the aforesaid directions, we deem it ....